The morning the news broke last week at the Daily Express that editor Sir Nicholas Lloyd was leaving, the reaction was mixed, to say the least.

Some thought he had decided to leave of his own accord, tired of the grind of running one of Fleet Street's most under-invested newspapers; sick of being the perennial also-ran, beaten by the broad shoulders of the Daily Mail - uncertain of its agenda where the Mail is confident, even arrogant.

There was even talk that he would leave to mount a management buy-out of the titles, to exact revenge on Lord Stevens, the paper's owner, and show what could be done with the paper if it had a different management.

Others saw his resignation as the enforced departure of a liability: a man intent on being the last serious editor in Britain solidly behind John Major.

Certainly Lord Stevens, chairman of United News and Media, so intent on making a go of the Express Group (illustrious in history, once phenomenally profitable and now so risibly weak), was forced to make a move. The Express titles, along with the Daily Star and a raft of regional papers, are the poor performers in an otherwise healthy parent company: United News and Media makes good profits from its exhibitions and magazine operations. But the City regards the combined operations with suspicion.

The first indication that management was taking the initiative came late this summer, when it announced that 220 jobs would go. That began to attack the first of the Express Group's three main problems: a high cost base, lack of investment, and stagnating circulation. Insiders initially believed that the second front - the move to pump more money into editorial budgets - might have begun with yesterday's 3p increase in the cover price, matching the Daily Mail's 35p a copy. But Andrew Cameron, the managing director, told Sir Nicholas he would not be getting much, if any, of the extra pounds 10m a year likely to be generated by the price increase.

On the third front, circulation, the group's management believes that improved editorial content is the only way to stop the slide. Under Sir Nicholas's direction, the Daily Express's circulation fell over 10 years from the 2 million mark to just over 1.2 million - galling for a title that, in its Beaverbrook glory days, regularly sold in excess of 4 million.

That Lord Stevens was ready to dump Sir Nicholas became painfully obvious when it was revealed that the chairman and Mr Cameron travelled to New York four weeks ago to offer the job to Martin Dunn, former editor of Today and now at the New York Daily News, for a salary reputed to be pounds 300,000 (the new benchmark for Fleet Street editors since the Telegraph's Max Hastings decamped to the Evening Standard for that amount).

That Lord Stevens was not yet ready to announce a change of editor was equally obvious. In the terse statement that heralded Sir Nicholas's departure, it was clear that no successor had been found and that the resignation would take effect only at the end of the month.

The fact that so few names have been mentioned as likely replacements suggests Lord Stevens is having difficulty. Kelvin MacKenzie, former editor of the Sun and now head of Mirror TV, has ruled himself out.

Barring an offer he can't refuse (say, from the secretive Barclay brothers now completing a purchase of the Scotsman, or Tony O'Reilly, owner of 43 per cent of the Independent) Lord Stevens is unlikely to sell the titles outright.

That leaves the prospect either of a spin-off, listing the newspaper holdings separately in order to divert investor attention to the more lucrative magazine and exhibition holdings, or a proper programme of reinvestment and editorial improvement.

The stock market apparently believes Lord Stevens is committed to the operations, and marked up the share price last week. If this summer's cost-cutting can be matched by further savings - for instance through working with other newspaper groups to share general back office and production costs - then perhaps financial prospects can be improved.

There is every reason to believe Lord Stevens will make a concerted effort to stop the rot. His ego would be bruised if some kind of recovery (or perhaps, as a long shot, a sale at a phenomenal price) was not forthcoming. He will have an eye on the value of his stock options, too: last week's 19p increase to 536p was a welcome first step back to the 700p-plus value achieved last year, and even for well-heeled Lord Stevens every little bit helps.